This invention relates in general to information processing and more specifically to a system for tracking, analyzing and managing information related to payment of worker's compensation premiums.
Currently California, and most other states, base their worker's compensation insurance rates on an individual employee's job classification (type of job they do e.g. software engineer, maid, etc.) coupled with the employee's overall annual compensation package (salary, bonuses, car allowance, sales commissions). Using these criteria and guidelines from the California Worker's Compensation Insurance Rating Bureau, the insurance companies bill their customers accordingly.
This system has weaknesses that can lead to inaccurate calculation of customer premiums. For example, customer premiums paid by companies to insurance carriers may not be indicative of the companies' employees' actual job liability or how many hours an employee works. Instead, the premiums are heavily based on an employee's overall compensation and job classification, even though these factors may not have much to do with a likelihood of injury. In addition, an employee's worker's compensation benefits do not necessarily correspond with the premium paid. For example, for a highly paid executive, the premium will be much higher (due to higher compensation) even though the executive is less likely to be injured on the job than someone like a drill-press operator or a networking hardware engineer working in a lab. Also, if the executive is injured, the worker's compensation benefit is't appreciably more than the drill-press operator or hardware engineer, even though the premium paid for the executive's worker's compensation insurance was much higher.
Another drawback with traditional approaches to worker's compensation is that they often require manual, labor-intensive yearly audits and post-facto billing. As often as quarterly, an insurance company might audit the payroll records of customers, usually 45 to 60 days following the expiration of a policy. These audits are bothersome to most insurance customers, are costly, unproductive, and there are no uniform electronic data collection methods to aid in this process. In addition, because an insured company's premiums and audits are post-facto and not during or at the close of the business quarter in which they were used, tax and financial planning/reporting is more complicated. SEC reporting and general expense planning procedures are also impacted.
Today's worker's compensation plans use confusing multifaceted payroll adjustments. The insurance customer must frequently adjust the payroll parameters such as executive compensation, overtime pay, meals, lodging, car allowance, and other items. Moreover, the nature of these adjustments can change anytime an employee's compensation criteria changes.
Many of these parameters have no real bearing on an employee's worker's compensation, liability or benefit and yet must be included in reports and procedures in order to meet state and insurance company guidelines. In addition, because worker's compensation premiums are primarily compensation-based, there is an inherent disincentive for employers to increase employees' compensation because the employer will, in turn, have to pay a higher worker's compensation premium for that employee.
In some cases, an employer may be paying premiums based on two or more compounding calculations. This can be prejudicial and detrimental to the employees and the employer and does nothing to improve the insuree's “real” coverage.
Another common practice with today's worker's compensation systems is to assign a same job classification to all employees. This single classification can be the most expensive one for the employer. In other words, an employer may have all employees assigned to a classification requiring the highest worker's compensation premiums even though only one, or a few, employees are at that higher classification. In California, this is known as the “Single Enterprise Rule”.
For example, a software company's software engineers will have a certain classification. As long as they only have workstations and normal cubicles at work, they will maintain a software or clerical type insurance classification. However, if they add a small lab with one hardware engineer then everyone at the company might be reclassified to the higher “hardware engineer” rate due to a perceived higher risk in the workplace. However, the fact may be that none of the clerical or software engineers may ever go inside this small lab and incur any greater risk of injury.
In summary, the result of the aforementioned anomalies in today's worker's compensation systems is that premiums charged to companies don't accurately reflect the true liability of any particular worker. In addition, the systems' rating structures can be unnecessarily complex, making it difficult to track, audit, and project accurate rates that reflect actual current and future liabilities. Today's systems can also be unfair and prejudicial to the employers and employees by creating a disincentive for increasing employees' compensation, which would in-turn increase their associated worker's compensation premium. Today's systems sometimes unfairly treat all employees under a single (most expensive) job classification, thereby unnecessarily overcharging employers for worker's compensation premiums.